A trade agreement is a contractual arrangement executed between states defining their trade relationships and guaranteeing investments. It may be bilateral or multilateral, that is, between two states or more than two states.
For majority of the countries across the world, international trade is regulated by different kinds of unilateral barriers such as tariffs, non-tariff barriers, and outright prohibitions. Trade agreements provide a mutually beneficial pathway to reduce these barriers, thereby opening the parties to contract to all the benefits of increased trade while also safeguarding their respective interests. In a couple of cases, trade barriers may be practiced for other non-economic reasons including but not limited to protecting the domestic industries, national security or the desire to preserve or insulate the local culture from foreign influences.
As different economies feature different stages of development and interests, it is not surprising that successful trade agreements are quite complex.
Asia-Pacific Region?s International Trade Dynamics
The region has always been the largest trading partner globally for trade in goods, accounting for 39.8 per cent of global merchandise exports and 36.5 per cent of global merchandise imports in 2018, according to a report released in December 2018 by the United Nation?s Economic and Social Commission for Asia and the Pacific (ESCAP).
In 2017, the international trade growth across the Asia-Pacific region had staggeringly moved up beyond the total global trade growth, with exports and imports registering double-digit growth rates of 11.5 per cent and 15 per cent, respectively. However, this dynamic period for the Asia-Pacific region did not sustain through the next year 2018 due to considerable deceleration created by large production costs and risks related to rising fuel prices and escalating trade tensions between large economies, the United States of America and China, in particular. The US-China trade and technology conflict is leading to immense repercussions for businesses worldwide, causing dampening of trade and investment climates, thus fuelling uncertainties and volatilities in the global markets.
China is a leading driver of trade and investment in Asia and the Pacific and accounted for 34 per cent of the global exports from the region in 2017 and 28 per cent of the imports in the region were shipped to China during the same year. ESCAP has estimated that the export volume of the Asia-Pacific region may slow to 2.3 per cent in 2019, while import growth may drop to 3.5 per cent. As for commercial services exports and imports, China and India together with Japan and Singapore accounted for more than half of the services trade in the region.
The Regional Comprehensive Economic Partnership (RCEP) is apparently a mega-regional economic agreement being negotiated since 2012 between the 10 ASEAN (Association of South-East Asian Nations) governments and their six FTA (free trade agreement) partners: Australia, China, India, Japan, New Zealand and South Korea. The main objective of the initiation of this RCEP was to support economic growth and ensure equitable economic development while promoting economic cooperation within the nations and also deepening integration within the region through effective and inclusive negotiation.
The negotiation gained momentum since 2016 and has missed several deadlines ever since. India has always been wary of the pact due to the presence of China in it. For India, the key matters of discussion with regard to the RCEP have been exclusion of dairy imports from the agreement, ensuring protection to sensitive sectors from the large number of Chinese imports and investments.
However, after the recent meeting conducted by Indian Prime Minister Narendra Modi with key economic ministries, it is largely being speculated that India would go ahead with the RCEP agreement with some safeguards and caveats in place to protect its interests.
According to earlier media reports, India has been contemplating on plans to reduce the duties on 86% to 88% of imports from Australia and New Zealand, and also reduce duties on 90% of products entering its border from ASEAN, Japan and South Korea. In addition, the country has offered elimination of tariffs on 80% of products imported from China in lieu of steeper concessions. However, some political parties and domestic producers continue to oppose and fear fierce competition that they would have to encounter as the country is suddenly flooded with cheaper Chinese goods.
Negotiations are occurring amongst the participants in the RCEP giant free trade in Bangkok and the same is expected to be finalised by end of 2019.
The government officials In India are of the view that the RCEP treat would offer the Indian industry a good exposure to the global supply chains for high-end goods such as electronics and engineering.
Although Australia has not been able to strike bilateral trade deal with India yet, the ties have been improving between the two nations. The tourist numbers from India and Indian students coming to Australia have both increased by over 50 per cent and 30 per cent respectively, which makes India as Australia?s third-largest source of immigrants, after its close neighbour New Zealand.
There is a very compelling case for Australia to strike out a deal with India, specifically given the potential for growth in furthering the economic relationship. Additionally, in case Australia is successful in executing an FTA with India, it may also gain some protection in case of a challenging Australia-China relationship.
Australia?s largest trading partner is China and the country has long enjoyed the benefits of China?s economic progress, with China being an important destination for one-third of Australian exports, as well as contributes to around one-fifth of foreign imports entering Australia.??
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